In his book The Future of Capitalism, Lester Thurow, professor of economics and management at Massachusetts Institute of Technology, posed the following question:
“What should a capitalistic society do about long-run environmental problems such as global warming?”
His answer sounds a little too cynical, even for an economist:
“Using capitalist decision rules, the answer to what should be done today to prevent such problems is very clear – do nothing.”
Was Thurow was being unfair? What do business people themselves have to say on the matter?
We’ve had a good opportunity to find out here in Aotearoa New Zealand with parliamentary select committee hearings on an emissions trading scheme to reduce greenhouse gas pollution. During public submissions to the committee, some of New Zealand’s industry leaders have been giving their own responses to Thurow’s question.
Andrew Ferrier, chief executive of dairy company Fonterra (here): “If we have more constraints put on existing dairy production or growth of our production in New Zealand, other countries will fill the supply gap.”
Chris Kelly, chief executive of state-owned farming company Landcorp (here), said the scheme could reduce the company’s net profit by between 25 per cent and 50 per cent in 2013 and by 75 per cent by 2030. Landcorp told the select committee that farmers should not be asked to pay for methane and nitrous oxide emissions from their properties before 2013.
Dave Bodger, general manager of petrol retailer Gull (here): “There’s a risk that we might become uncompetitive under the emissions trading scheme as proposed, and we may choose no longer to operate in New Zealand if we are uncompetitive.”
David Graham, chairman of fertiliser company Ballance Agri-Nutrients (here): “Ballance and New Zealand businesses will be exposed to the full cost of carbon at high allowance prices all too quickly … In fact, these firms are essentially being encouraged to shut down and leave New Zealand.”
Paul Hemburrow, general manager of New Zealand Aluminium Smelters (subsidiary of Rio Tinto Alcan) (here): “The bill, as currently drafted, would most likely put us on the pathway to closure. I cannot tell you the exact date when the production at the smelter would become uneconomic, other than to say it’s likely to be well before … the end of 2030.”
All these men are acting exactly as Thurow predicted – they oppose any action that would threaten profitability and growth, even an emission trading scheme as weak-kneed as this one. Given that the ‘prime directive’ for business leaders is to maximise returns on shareholders’ investments, this is how they must respond if they want to keep their jobs.
And so, with an unhealthy dose of scare-mongering about jobs thrown into the mix as well, these business leaders are effectively saying we should do nothing on climate change.
It seems that Thurow wasn’t being cynical at all – he was just being honest.